“It’s sort of like a death in the family, we’ve just been so engaged in this process for so long and it puts a big nail in the coffin for what could have been one of the greatest opportunities for the East Coast of Tasmania.”

While Premier Will Hodgman said he was “disappointed” at the news, Mr Paulsen said the government was crying “crocodile tears”.

“We were totally reliant on the state government to get engaged and they just didn’t,” he said.

In July, a state government spokesman said they would be “submitting a bid” to the Royal Australian Navy for the scuttling of HMAS Tobruk at Skeleton Bay.

“What they said and what they did were totally contradictory,” Mr Paulsen said.

“The Tobruk was going to set us apart … and be a point of difference.”

Premier Will Hodgman said it had not been a level playing field with the Federal Government expecting Tasmania to foot the bill to sink the ship.

“Tasmania [is] the only state that has not been given a former ship for scuttling as a dive wreck. It was unfair of the Commonwealth to ever expect Tasmania to pay $10 million for the Tobruk given this had not been required of other states,” he said.

“As responsible financial managers the Tasmanian Liberal Government could not contemplate such a big hit to our budget bottom line – it would have meant less money for health, education and other essential services.”